Sembcorp Industries said Friday it agreed to provide Sembcorp Marine with a five-year subordinated loan of S$2 billion to strengthen the rig builder’s financial position amid an on-going severe global downturn in the offshore and marine industry.
“While the offshore and marine industry has shown signs of recovery, such recovery is expected to be gradual and sustained new orders for Sembcorp Marine will take time to materialize,” the two companies said in a filing to SGX.
“Working capital needs have also increased especially for major engineering, procurement and construction projects,” the filing said, adding the financing is expected to better position SembMarine for the industry’s eventual recovery.
SembMarine will use the loan to retire around S$1.5 billion of borrowings, with the balance earmarked for working capital and general corporate purposes, the companies said.
The S$1.5 billion portion of the loan to SembMarine will have a fixed rate of 3.55 percent a year, while the remaining S$500 million will have a rate of the Singapore swap offer rate (SOR) plus 1.91 percent, the filing said.
To fund the loan, Sembcorp Industries will issue S$1.5 billion of five-year bonds via a private placement to DBS Bank as the sole lead manager and initial purchaser, the filing said. The bonds will have an interest rate of 3.55 percent.
Investors in the bonds will include Singapore state-owned investment company Temasek, the filing said.
The remaining S$500 million of the loan to SembMarine will be funded by Sembcorp Industries’ existing resources and facilities, the company said.
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